I wrote last month that the debt burden in Greece doesn’t preclude economic recovery. After all, both the United States and (especially) the United Kingdom had enormous debt burdens after World War II, yet those record levels of red ink didn’t prevent growth.

Climbing out of the debt hole didn’t require anything miraculous. Neither the United States nor the United Kingdom had great economic policy during the post-war decades. They didn’t even comply with Mitchell’s Golden Rule on spending.

But both nations managed to at least shrink the relative burden of debt by having the private sector grow faster than red ink. And the recipe for that is very simple.

…all that’s needed is a semi-sincere effort to avoid big deficits, combined with a semi-decent amount of economic growth. Which is an apt description of…policy between WWII and the 1970s.

Greece could achieve that goal, particularly if politicians would allow faster growth. The government could reduce red tape, which would be a good start since the nation ranks a miserable #114 for regulation in Economic Freedom of the World.

That may seem a challenge considering the level of red ink, but good tax policy would be possible if the Greek government was more aggressive about reducing the burden of government spending.

And if that’s the goal, then the Baltic nations are a good role model, as explained by Anders Aslund in the Berlin Policy Journal. With Latvia being the star pupil.

…austerity policies have not been attempted most aggressively in Greece: all three Baltic countries pursued more aggressive fiscal adjustments, especially Latvia. The Latvian government faced the global financial crisis head-on. …The Latvian government carried out a fiscal adjustment of 8.8 percent of GDP in 2009 and 5.9 percent of GDP in 2010, amounting to a fiscal adjustment of 14.7 percent of GDP over the course of two years, totaling 17.5 percent of GDP over four years, according to IMF calculations. Greece did the opposite. According to the IMF, its fiscal adjustment in the initial crisis year of 2010 was a paltry 2.5 percent of GDP, and in 2011 only 4.1 percent, a total of only 6.6 percent of GDP over two years. Greece’s total fiscal adjustment over four years was only 11.1 percent of GDP.

In 2008-10 Latvia suffered an output decline of 24 percent, as much as Greece did in the six-year span from 2009-14. However, thanks to its front-loaded fiscal adjustment, Latvia was able to restore its public finances after two years. The country has shown solid economic growth, averaging 4.3 percent per year from 2011-14, according to Eurostat. …The consequences of tepid Greek fiscal stabilization have been a devastating six years of declining output, even as the Latvian economy has revived. In 2013 Latvia’s GDP at constant prices was 4 percent lower than in 2008, while Greece’s was 23 percent less than in 2008, according to the IMF. A cumulative difference in GDP development of 19 percentage points over six years cannot be a statistical blip – it is real.

That was a wise choice, particularly since the alternative, as we see in Greece, is seemingly permanent stagnation.

Anders Paalzow of the Stockholm School of Economics in Riga also suggests, in a recent article in Foreign Affairs, that Latvia is a good role model.

Professor Paalzow starts by explaining that Latvia is now enjoying good growth after enduring a dramatic boom-bust cycle last decade.

In 2008, Europe’s most overheated economy, which had been fuelled by cheap credit and rapidly raising wages and real estate prices, collapsed. GDP dropped by 20 percent and unemployment rose to more than 20 percent. But here’s where things take an unexpected turn. By late 2010, the first glimmers of recovery became apparent. Today, the economy is among Europe’s fastest growing, and its GDP is back at pre-crisis levels. So how did Latvia, the hero of this story, do it?

The first thing to understand is that Latvia was determined to join the eurozone, so that meant it wasn’t going to devalue its currency in hopes of inflating away its problems. Which meant the only other choice was “internal devaluation.”

…the Latvian government’s only real option was fiscal policy adjustment, the details of which it unveiled in its supplementary budget for 2009 and its budget for 2010. Both of these saw substantial reductions in social benefits accompanied by long overdue cuts in public employment with close to 30 percent of civil servants laid off. Those who remained in the public sector saw their salaries cut by 25 percent, on average, whereas salaries in the private sector fell by on average ten percent. …the reductions made during the crisis years amounted to approximately 11 percent of GDP. Most of the fiscal consolidation was done on the expenditure side of the public budget… The fiscal consolidation program continued into 2011 and the years following, even though the economy started to grow again.

Not only did the economy grow, but the government was rewarded for making tough choices.

…in 2010, the government responsible for austerity was reelected.

But here’s the challenge. Professor Paalzow warns that fiscal reforms won’t mean much unless the chronic dysfunction of the Greek government is somehow addressed.

The importance of the institutional framework cannot be overestimated. …it seems like a fool’s errand to try to sell off the public assets of a country riddled with high corruption… Furthermore, with a legal system incapable of enforcing current legislation and characterized by slow judicial processes, inefficient courts, and weak investor protection, legal reform will be a necessary condition for an economic turnaround.

So he suggests that Latvian-type fiscal reforms should be accompanied by Nordic-style institutional reforms.

Greece should look further north to Finland and Sweden, which overcame their own crises in the early 1990s. …The three to four years following the initial economic disaster saw remarkable institutional reform…substantial changes in both welfare systems. …both countries pursued austerity…, a remedy that both nations had frequently tried in the 1970s and 1980s without any success. What made the difference this time was that the institutional, and hence the fundamental roots, of the problems were addressed.

While I like his prescription, I suspect Paalzow is being too optimistic.

You can’t turn the Greeks into Finns or Swedes, at least not without some sort of massive jolt.

Which is why my preferred policy is to end bailouts, even if it means that Greece repudiates its existing debt. If the Greeks no longer got any handouts, that necessarily would mean an immediate end to deficit spending (assuming the government doesn’t ditch the euro in order to finance spending by printing drachmas).

And I’ve also used that analogy when writing about France and Detroit.

But I’m probably not doing justice to Ayn Rand’s famous novel because Atlas Shrugged is not just about an economy that collapses under the weight of too much government regulation, intervention, and control.

I probably won’t give the right description since I’m a policy wonk rather than philosopher, but Atlas Shrugged is also about the perils of self-sacrifice.

And I couldn’t help but think about that aspect of the book when I read the comments of certain Greek politicians during yesterday’s bailout vote in Athens.

If you scroll down to the 14:40 mark of this timeline from the U.K.-based Telegraph, you’ll find some remarkable comments that sound like they came straight from Ayn Rand’s book.

Greece’s ruling Syriza party has accused David Cameron of being mean over his objections to allowing British taxpayer’s money to be used to help Athens meet upcoming debt payments. …Mr Cameron’s attitude was described as cold-hearted by Nikos Xydakis, a deputy culture minister in Syriza. “Mr Cameron must explain to the European people and 11 million Greeks why he wants them to suffer a social crisis,” Mr Xydakis told The Telegraph. “This is not about politics, this is about human souls.”

But let’s stick with our main topic. Notice how the moochers in Greece are trying to use guilt as a weapon. I’m sure some Ayn Rand experts will correct me if I’m wrong, but the aforementioned comments definitely sound like passages from Atlas Shrugged.

That being said, the Germans apparently have more in common with John Galt than Jim Taggart. Here are some excerpts from a column in the New York Times by Jacob Soll, a professor from the University of Southern California. He recently attended a conference in Germany and found very little sympathy for the Greeks.

…when the German economists spoke…, a completely different tone took over the room. Within the economic theories and numbers came a moral message: The Germans were honest dupes and the Greeks corrupt, unreliable and incompetent. …the Greeks destroyed themselves over the past four years. Now the Greeks deserved what was coming to them. …Debtors who default, they explained, would simply have to suffer…a country like Greece…did not seem to merit empathy. …When the panel split up, German attendees circled me to explain how the Greeks were robbing the Germans. They did not want to be victims anymore.

Wow, who knew the Germans were a bunch of closet Randians!

No wonder the Greek politicians decided to target David Cameron instead.

For what it’s worth, I must have some German blood in my veins because I wasn’t overly sympathetic to Greece in this interview.

I even referred (again) to “looters” and “moochers,” which are terms used in Rand’s book.

I’ll make two comments about the interview.

My prediction about the vote in Greece was correct. Though I wish I had been wrong because the best long-run outcome (both for the Greek people and the world’s taxpayers) is an end to bailouts.

I mentioned that there will be more debt-crisis dominoes at some point in the future. I hope I’m wrong, but it’s hard to be optimistic when you look at long-run fiscal estimates from theIMF,BIS, andOECD.

Here’s a look at how banks in various European nations have been able to reduce their exposure to Greek debt.

Sure, the banks almost surely still lost money, but they also transferred a lot of the losses to taxpayers.

To get a sense of the magnitude of handouts, here’s a chart from a Washington Poststory.

And now, assuming the deal gets finalized, that pile of foolish and unsustainable debt will be even bigger.

One of the main components of the new agreement is that Greece supposedly will raise revenue by selling $50 billion of state-owned assets.

Don’t believe that number. But not because there aren’t plenty of assets to sell, but rather because the track record on privatization proceeds suggests that there is a giant gap between what Greece promises and what Greece delivers.

To understand why assets aren’t being sold, just keep in mind that most of the assets are under the control of the government in order to provide unearned benefits to different interest groups.

If you’re an overpaid unionized worker at a government-owned port, for instance, the last thing you want is to have that port sold to a private investor who presumably would want to link pay to productivity.

Here’s the best bit of humor I’ve seen about the negotiations this past weekend. It purports to show a list of demands from Germany to Greece.

While this image is funny, it’s also wrong.

Germany isn’t imposing anything on Greece. The Germans are simply stating that Greek politicians need to make some changes if they want more handouts.

Moreover, it’s quite likely that Germany will wind up being a big loser when the dust settles. Here’s some of what Gideon Rachman wrote for the U.K.-based Financial Times.

If anybody has capitulated, it is Germany. The German government has just agreed, in principle, to another multibillion-euro bailout of Greece — the third so far. In return, it has received promises of economic reform from a Greek government that makes it clear that it profoundly disagrees with everything that it has just agreed to. The Syriza government will clearly do all it can to thwartthe dealit has just signed. If that is a German victory, I would hate to see a defeat.

So true.

I fear this deal will simply saddle Greece with a bigger pile of debt and set the stage for a more costly default in the future.

The title of this column is about pictures. But let’s close with some good and bad analysis about the Greek mess.

Writing for Real Clear Markets, Louis Woodhill has some of the best insight, starting with the fact that the bailout does two things.

…the €53.5 billion in new loans…would just be recycled to Greece’s creditors (the IMF, the EU, and the ECB) to pay the interest and principal on existing debts.

Second, it prevents the full meltdown of Greek banks.

The key point is that a bailout agreement would restore European Central Bank (ECB) “Emergency Liquidity Assistance” (ELA) to the Greek banking system. This would allow Greeks that still have deposits in Greek banks (€136.5 billion as of the end of May) to get their money out of those banks.

That’s good news if you’re a Greek depositor, but that’s about it.

In other words, those two “achievements” don’t solve the real problem of Greece trying to consume more than it produces.

Indeed, Woodhill correctly identifies a big reason to be very pessimist about the outcome of this latest agreement. Simply stated, Greek politicians (aided and abetted by the Troika) are pursuing the wrong kind of austerity.

…what is killing Greece is a lack of economic growth, and the meat of Tsipras’ bailout proposal consists of growth-killing tax hikes. The media and the economics profession have been framing the alternatives for Greece in terms of a choice between “austerity” and “stimulus.” Unfortunately for Greece, austerity has come to mean tax increases, and stimulus has come to mean using “other people’s money” (mainly that of German taxpayers) to support Greek welfare state outlays. So, if “other people” aren’t willing to fund more Greek government spending, then the only option the “experts” can imagine is to raise taxes on an economy that is already being crushed by excessive taxation.

Joseph Stiglitz accused Germany on Sunday of displaying a “lack of solidarity” with debt-laden Greece that has badly undermined the vision of Europe. …”Asking even more from Greece would be unconscionable. If the ECB allows Greek banks to open up and they renegotiate whatever agreement, then wounds can heal. But if they succeed in using this as a trick to get Greece out, I think the damage is going to be very very deep.”

Needless to say, I’m not sure why it’s “solidarity” for one nation to mooch in perpetuity from another nation. I suspect Stiglitz is mostly motivated by an ideological desire to redistribute from the richer Germans to the poorer Greeks,

But I’m more interested in why he isn’t showing “solidarity” to me. I’m sure both his income and his wealth are greater than mine. So if equality of outcomes is desirable, why doesn’t he put his money where his mouth is by sending me a big check?

And I also won’t be holding my breath waiting for a good outcome in Greece. As I wrote five-plus years ago, Greece needs the tough-love approach of no bailouts, which would mean a default but also an immediate requirement for a balanced budget.

Last but not least, I’m going to confess a possible mistake. I always thought that Margaret Thatcher was right when she warned that the problem with socialism is that you eventually run out of other people’s money. But this latest bailout of Greece shows that maybe politicians from other nations are foolish enough to provide an endless supply of other people’s money.

Sort of reminds me of a headline I saw attached to a report by Reuters a few years ago.

Geesh, the Greeks already suffered because of an invasion by people working for the German government back in the 1940s. Seems like another deployment of German bureaucrats would be adding insult to injury.

I’m not sure where that would end, but it surely wouldn’t be a good place.

Now let’s make a more serious point about tough love and Greek suffering.

Back in early 2010, about the time the Greek fiscal crisis was becoming a big issue, I warned that a bailout would actually make things worse. I suggested it would be better to let Greece default, both because it would penalize foolish investors who lent too much money to the Greek government and because it would force Greece to live within its means.

That would have meant short-run pain, to be sure, but I think that approach would have involved the least amount of aggregate suffering.

But the political class ignored my helpful advice and instead decided that bailouts would be a better idea. But how has that worked out? The Greek economy has been moribund and the Greek people are now saddled with far more debt. Yes, some short-run pain was mitigated, but only at the cost of much more pain over the past few years (with more pain in the future).

Interestingly, the International Monetary Fund’s top economist unintentionally has confirmed my analysis. Here’s some of what Olivier Blanchard recently posted as part of an effort to defend the IMF’s choices back in 2010.

Had Greece been left on its own, it would have been simply unable to borrow. …Even if it had fully defaulted on its debt, given a primary deficit of over 10% of GDP, it would have had to cut its budget deficit by 10% of GDP from one day to the next. These would have led to much larger adjustments and a much higher social cost.

Blanchard obviously thinks reducing government spending by 10 percent of GDP would have imposed too much “social cost,” but imagine if Greece had bitten the bullet back in 2010. Sort of like what Estonia did in 2009.

Yes, there would have been a challenging adjustment. Interest groups would have received fewer handouts. Greek bureaucrats would have lost jobs and/or had their pay reduced. Payments to vendors would have been delayed. State-run TV may have been shut down. The regulatory apparatus probably would have been cut back. And I’m sure the Greek government probably would have raised taxes as well.

Now imagine how much better off Greece would be today if it went with that approach.

We don’t have a parallel universe where we can see the results of that different approach, but consider the fact that Estonia had a deeper downturn than Greece, presumably in part because it undertook strong measures, but since that time has been Europe’s fastest-growing economy.

Greece, by contrast, has been Europe’s slowest-growing economy. Hmmm…seems like this should be part of any discussions about “social cost.”

So what lessons can we learn?

I realize there are lots of factors that determine economic performance and that it’s impossible to isolate the impact of either Estonia’s spending-cut policy or Greece’s bailout policy. But it would take a very bizarre and untenable set of assumptions to conclude that Estonia didn’t make smarter policy choices.

The only silver lining to Greece’s dark cloud is that it’s not too late to do the right thing.

P.S. Since we ended by speculating about the good results of my tough-love approach, let’s also enjoy some Greek-related humor.

In 2014, total general government expenditure amounted to €6 701 bn in the European Union (EU). This represented almost half (48.1%) of EU GDP in 2014… Among EU Member States, general government expenditure varied in 2014 from less than 35% of GDP in Lithuania and Romania to more than 57% in Finland, France and Denmark.

Not only is government spending consuming almost half of economic output, redistribution outlays are the biggest line item in the budgets of European nations.

…the function ‘social protection’ was by far the most important, accounting for 40.2% of total general government expenditure. The next most important areas in terms of general government expenditure were ‘health’ (14.8%)… Its weight varied across EU Member States from 28.6% of total general government expenditure in Cyprus to 44.4% in Luxembourg. Eight EU Member States devoted more than 40% of their expenditure to social protection.

At this point, some readers may be thinking that the report shows European nations have very big governments with very large welfare states, but that doesn’t prove one way or the other whether there’s been austerity.

After all, austerity supposedly measures the degree to which there have been big spending cuts, not whether government consumes a large or small share of economic output.

So let’s now look at some of the underlying annual spending data from Eurostat.

Here’s their chart showing annual levels of government spending, both for the entire European Union (EU-28) and for the nations using the euro currency (EA-19). As you can see, there haven’t been any “harsh” or “savage” cuts.

Heck, there haven’t even been “timid” and “meek” cuts. The burden of government spending keeps climbing.

Third, some people cherry pick data on the burden of government spending relative to economic output and assert that austerity exists if government grows slower than GDP.

The people in the first category should be dismissed as cranks and ideologues.

Regarding the second category, if you look at Eurostat’s annual fiscal data, you’ll find that most EU nations since 2008 have had at least one year in which government spending declined. Indeed, the only exceptions are Belgium, France, Luxembourg, Austria, Poland, Slovakia, Finland, and Sweden.

But we’ve also had a few years of spending reductions in the United States since 2008, yet it would be silly to argue we’ve had “savage” and “harsh” cuts. The real question is whether any governments have been forced to make non-trivial reductions in the burden of spending. And if that’s defined as spending less today than they did in 2008, the only nations on that list are Greece, Latvia, and Ireland. But they’re also high on the list of countries that were most profligate in the years before 2008, so is it “austerity” if you give up drinking for a week or two after spending a week or two in an alcoholic haze? Perhaps the answer is yes, but the real problem was having a spending binge in the first place.

The third category is also worth exploring because the best way to determine if a country has responsible policy is to see whether government spending is falling as a share of economic output (i.e., are they following Mitchell’s Golden Rule). But you can’t cherry pick the data. For instance, look at this chart from Eurostat. If 2009 is used as the base year, it appears that EU nations have been frugal. But 2009 also was the year with the biggest bailouts and faux stimulus packages. So while government spending has receded a bit from the 2009 peak, the overall burden of spending today is significantly higher than it was before the 2008 crisis. Not exactly a very rigorous definition of austerity.

The bottom line is that there hasn’t been serious austerity in Europe, at least if austerity is defined as non-trivial spending cuts.

P.P.S. Even though Switzerland isn’t a member of the EU, Eurostat does include annual spending data for that nation. And it’s worth noting that spending has only grown by 2.07 percent per year since the implementation of the debt brake (which is really a spending cap). So that’s actually the best role model in Europe, as explained here by a representative from the Swiss Embassy.

I then ask audiences a rhetorical question about a possible list of nations that have prospered by going in the opposite direction. Are there any success stories based on tax hikes or bigger government?

The answer is no, which is why I’ve never received a satisfactory answer to my two-part challenge, even if I limit the focus to fiscal policy.

And nobody will be surprised to learn that the fiscal crisis in Puerto Rico reinforces these lessons.

Writing for the Wall Street Journal, Daniel Hanson explains that the American territory in the Caribbean is on the verge of default.

As Puerto Rico struggles under the weight of more than $70 billion in debt, it has become popular to draw parallels with Greece.

The one theme that is common with the two jurisdictions is that their fiscal crises are the result of too much government spending.

How bad is the problem in Puerto Rico?

It’s hard to answer that question because government budgeting isn’t very transparent and the quality and clarity of the numbers that do exist leaves a lot to be desired.

But I’ve done some digging (along with my colleagues at Cato) and here’s some data that will at least illustrate the scope of the problem.

First, we have numbers from the World Bank showing inflation-adjusted (2005$) government consumption expenditures over the past few decades. As you can see, overall spending in this category increased by 100 percent between 1980 and 2013 (at a time when the population increased only 12 percent).

In other words, Puerto Rico is in trouble because it violated the Golden Rule and let government grow faster than the private sector over a sustained period (just like Greece, just like Alberta, just like the United States, etc, etc).

Here’s another chart and this one purports to show total outlays.

The numbers aren’t adjusted for inflation, so the increase looks more dramatic. But even if you consider the impact of a rising price level (average annual increase of about 4 percent since the mid-1980s), it’s obvious that government spending has climbed far too fast.

To be more specific, Puerto Rico has allowed the burden of government to rise much faster than population plus inflation.

A government can get away with that kind of reckless policy for a few years. But when bad policy is maintained for a long period of time, the end result is never positive.

Now that we’ve established that Puerto Rico got in trouble by violating my Golden Rule, what’s the right way of fixing the mess? Is the government responding to its fiscal crisis in a responsible manner?

Not exactly. Like Greece, it’s too beholden to interest groups, and that’s making (the right kind of) austerity difficult.

Indeed, Mr. Hanson says there haven’t been any cuts in the past few years.

In the past four years, when the fiscal crisis has been most severe, four successively larger budgets have been enacted. The budget proposed for the coming year is $235 million larger than last year’s and $713 million, or 8%, higher than four years ago. Austerity this is not.

What special interest groups standing in the way of reform?

The government workforce would be high on the list. One of the big problems in Puerto Rico is that there are far too many bureaucrats and they get paid far too much (gee, this sounds familiar).

Here are some details from Mr. Hanson’s column.

…more than two-thirds of the territory’s budget is payroll. The proposed budget…contains no plans for head-count reductions. …Median household income in Puerto Rico hovers around $20,000, according to the U.S. Census Bureau, but government workers fare much better. Public agencies pay salaries on average more than twice that amount,a 2014 reportfrom Banco Popular shows. Salaries in the central government in San Juan are more than 90% higher than in the private sector. Even across comparable skill sets, the wage disparity persists.

In other words, life is pretty good for the people riding in the wagon, but Puerto Rico doesn’t have enough productive people to pull the wagon.

So we’re back to where we started. It’s the Greece of the Caribbean.

P.S. This column has focused on fiscal policy, but it’s important to recognize that there are many other bad policies hindering prosperity in Puerto Rico. And some of them are the result of Washington politicians rather than their counterparts in San Juan. Nicole Kaeding and Nick Zaiac have explained that the Jones Act and the minimum wage are particularly destructive to the territory’s economy.

P.P.S. At least Puerto Rico is still a good tax haven for American citizens.

Back in 2010, Idescribed the “Butterfield Effect,” which is a term used to mock clueless journalists for being blind to the real story.

A former reporter for the New York Times, Fox Butterfield, became a bit of a laughingstock in the 1990s for publishing a series of articles addressing the supposed quandary of how crime rates could be falling during periods when prison populations were expanding. A number of critics sarcastically explainedthat crimes rates were falling because bad guys were behind bars and invented the term “Butterfield Effect” to describe the failure of leftists to put 2 + 2 together.

Here are some of my favorite examples, all of which presumably are caused by some combination of media bias and economic ignorance.

A newspaper article that was so blind to the Laffer Curve that it actually included a passage saying, “receipts are falling dramatically short of targets, even though taxes have increased.”

Another article was entitled, “Few Places to Hide as Taxes Trend Higher Worldwide,” because the reporter apparently was clueless that tax havens were attacked precisely so governments could raise tax burdens.

In another example of laughable Laffer Curve ignorance, the Washington Post had a story about tax revenues dropping in Detroit “despite some of the highest tax rates in the state.”

Likewise, another news report had a surprised tone when reporting on the fully predictable news that rich people reported more taxable income when their tax rates were lower.

There are some problems that not even $10 trillion can solve. That gargantuan sum of money is what central banks around the world have spent in recent years as they have tried to stimulate their economies and fight financial crises. …But it has not been able to do away with days like Monday, when fear again coursed through global financial markets.

I’m tempted to immediately ask why the reporter assumed any problem might be solved by having governments spend $10 trillion, but let’s instead ask a more specific question. Why is there unease in financial markets?

The story actually provides the answer, but the reporter apparently isn’t aware that debt is part of the problem instead of the solution.

Stifling debt loads, for instance, continue to weigh on governments around the world. …high borrowing…by…governments…is also bogging down the globally significant economies of Brazil, Turkey, Italy and China.

So if borrowing and spending doesn’t solve anything, is an easy-money policy the right approach?

…central banks like the Federal Reserve and the European Central Bank have printed trillions of dollars and euros… Central banks can make debt less expensive by pushing down interest rates.

The story once again sort of provides the answer about the efficacy of monetary easing and artificially low interest rates.

…they cannot slash debt levels… In fact, lower interest rates can persuade some borrowers to take on more debt. “Rather than just reflecting the current weakness, low rates may in part have contributed to it by fueling costly financial booms and busts,” the Bank for International Settlements, an organization whose members are the world’s central banks, wrote in a recent analysis of the global economy.

This is remarkable. The reporter seems puzzled that deficit spending and easy money don’t help produce growth, even though the story includes information on how such policies retard growth. It must take willful blindness not to make this connection.

Indeed, the story in the New York Times originally was entitled, “Trillions Spent, but Crises like Greece’s Persist.”

Wow, what an example of upside-down analysis. A better title would have been “Crises like Greece’s Persist Because Trillions Spent.”

Here’s another example from the story that reveals this intellectual inconsistency.

Debt in China has soared since the financial crisis of 2008, in part the result of government stimulus efforts. Yet the Chinese economy is growing much more slowly than it was, say, 10 years ago.

Hmmm…, maybe the Chinese economy is growing slower because of the so-called stimulus schemes.

At some point one might think people would make the connection between economic stagnation and bad policy. But journalists seem remarkably impervious to insight.

The Economist has a story that also starts with the assumption that Keynesian policies are good. It doesn’t explicitly acknowledge the downsides of debt and easy money, but it implicitly shows the shortcomings of that approach because the story focuses on how governments have less “fiscal space” to engage in another 2008-style orgy of Keynesian monetary and fiscal policy

The analysis is misguided, but the accompanying chart is useful since it shows which nations are probably most vulnerable to a fiscal crisis.

If you’re at the top of the chart, because you have oil like Norway, or because you’re semi-sensible like South Korea, Australia, and Switzerland, that’s a good sign. But if you’re a nation like Japan, Italy, Greece, and Portugal, it’s probably just a matter of time before the chickens of excessive spending come home to roost.

P.S. Related to the Fox Butterfield effect, I’ve also suggested that there should be “some sort of “Wrong Way Corrigan” Award for people like Drum who inadvertently help the cause of economic liberty.”

P.P.S. And in the same spirit, I’ve proposed an “own-goal effect” for “accidentally helping the other side.”